Correlation Between Touchstone Small and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Smallcap World at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Touchstone Small and Smallcap World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone Small Cap and Smallcap World Fund, you can compare the effects of market volatilities on Touchstone Small and Smallcap World and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Touchstone Small with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Smallcap World.
Diversification Opportunities for Touchstone Small and Smallcap World
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and Smallcap is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Touchstone Small is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Touchstone Small Cap are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Touchstone Small i.e., Touchstone Small and Smallcap World go up and down completely randomly.
Pair Corralation between Touchstone Small and Smallcap World
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 1.18 times more return on investment than Smallcap World. However, Touchstone Small is 1.18 times more volatile than Smallcap World Fund. It trades about 0.08 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.05 per unit of risk. If you would invest 3,070 in Touchstone Small Cap on August 29, 2024 and sell it today you would earn a total of 1,099 from holding Touchstone Small Cap or generate 35.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. Smallcap World Fund
Performance |
| Timeline |
| Touchstone Small Cap |
| Smallcap World |
Touchstone Small and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Smallcap World
The main advantage of trading using opposite Touchstone Small and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Smallcap World can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Smallcap World will offset losses from the drop in Smallcap World's long position.| Touchstone Small vs. Pioneer High Yield | Touchstone Small vs. Prudential High Yield | Touchstone Small vs. Pia High Yield | Touchstone Small vs. Dunham High Yield |
| Smallcap World vs. Income Fund Of | Smallcap World vs. New World Fund | Smallcap World vs. American Mutual Fund | Smallcap World vs. American Mutual Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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